Research the area you're interested in to make sure there's a demand for rented property.
Speak to local letting agents about average rents and the amenities and features that will attract your target tenant.
Once you've selected the property, remember that it needs to be presented to a standard expected by that tenant.
Get yourself covered.
There are many different types of policy available covering not just buildings and contents but the additional risks associated with letting a property, such as emergency repair assistance, landlord's liability and rental guarantee.
Make sure your tenants understand that they are responsible for insuring their own possessions.
Make sure you have an appropriate tenancy agreement/lease in place, and that it's signed before tenant(s) move in. This will clearly set out your responsibilities and those of your tenant(s).
Think through the practicalities of managing your property. Consider employing a letting agency to find tenants, collect rent and deal with routine problems. Agencies typically charge 8-15% of the gross rental income.
When you've found the right property, work through the figures to make sure the project looks profitable.
In addition to your mortgage repayments, factor in the other costs like solicitors' fees, stamp duty, letting agency fees, landlord insurance, life cover, any furniture/furnishings, service charge and ground rent if the property is leasehold, together with the periodic costs of ongoing maintenance and repairs.
Remember to plan for potential interest rates rises and for periods when the property may be empty.
Responsibility and tax
As a landlord you'll have a number of legal responsibilities. For example, you need to ensure that:
- Gas and electrical appliances are safe
- Furniture and furnishings meet fire regulations
- Smoke alarms are installed if your property was built after June 1992
- The property is in a good state of repair
Inform HM Customs & Revenue of your rental income. If your total income for the tax year is greater than your personal tax allowance, you may have to pay tax.
You can offset allowable deductions such as your Buy to Let 3 mortgage interest payments against your rental income.
Capital Gains Tax
You may be liable for several kinds of tax when you own a Buy to Let property. It's worth taking expert advice to see how you can limit your liability.
In particular, when you sell your Buy to Let property you may have to pay CGT on the profit